1 Public Version of Application COMMERCE ACT 1986: BUSINESS ACQUISITION Section 66: Notice Seeking Clearance The Registrar Business Acquisitions and Authorisations Commerce Commission PO Box 2351 WELLINGTON and email: [email protected] Pursuant to section 66(1) of the Commerce Act 1986 notice is hereby given seeking clearance of a proposed business acquisition. PART 1: TO BE COMPLETED BY ALL APPLICANTS THE BUSINESS ACQUISITION 1. The business acquisition for which clearance is sought 1.1 The business acquisition for which clearance is sought is the acquisition by Solid Energy New Zealand Limited or a wholly-owned subsidiary (“Solid Energy”) of the entire share capital in Newvale Coal Co Limited (“Newvale” or “Company”) pursuant to the agreement for sale and purchase dated 18 August 2006 attached as Appendix A (“Agreement”). 1.2 The acquisition of the shares in Newvale and its assets referred to in 1.1 above means the entire undertaking of the company including all assets and liabilities of the Company including but not limited to mining licences, permits, consents, feasibility studies and mining information, all plant and equipment and all other property and interests acquired or held by or on behalf of the Company. 1.3 In broad terms, the grounds on which Solid Energy contends that the Commission should give a clearance in respect of the proposed acquisition are: 1.3.1 Approximately [ ] of the coal produced from the Newvale mine is sold to [ ] under a coal supply contract [ ] 1.3.2 All of the coal produced from the Newvale mine is lignite coal. The relevant market for consideration is the mining and distribution of lignite and sub bituminous (together referred to as thermal) coal in the southern half of the South Island (including South Canterbury). In this application “thermal coal” means lignite or sub-bituminous coal or blends which may also include bituminous coal; 1.3.3 the acquisition will not result in a substantial lessening of competition by Solid Energy in the above market due to constraints imposed by competitors (domestic and international), the possibility of new entrants, the fact that C:\NrPortbl\iManage\CPB1\515116_1.DOC SOL959\413 2 thermal coal may be blended with higher calorific value bituminous coals, the low cost of entry into lignite mining and constraints from other energy sources; 1.3.4 all other current suppliers in the market have the potential to increase production in response to any attempt by Solid Energy to restrict supply and/or increase the price of thermal coal; 1.3.5 Solid Energy’s Ohai opencast mine in Southland has approximately [ ] tonnes of economically recoverable reserves of sub-bituminous coal remaining. Its principal supply customer is [ ] 1.3.6 the recent acquisition (September 2006) of the Straith mine at Ohai by Eastern Corporation Limited (Eastern) demonstrates that new competitors are coming into the market. It is Eastern’s stated intention to have this mine produce 100,000 tonnes of thermal coal annually (from a total in ground resource of 2.85 million tonnes). Operations are due to commence in October 2006. NOTICE 2. Who is the person giving this notice? 2.1 This notice is given on behalf of Solid Energy New Zealand Limited: 2 Show Place Addington PO Box 1303 Christchurch Telephone: (03) 345 6000 Facsimile: (03) 345 6016 Attention: Warren Maslin (email: [email protected]) With all correspondence to: Lane Neave Lawyers PO Box 13149 Christchurch Telephone: (03) 364 6453 Facsimile: (03) 379 8370 Attention: Bill Dwyer (DD: (03) 364 6459) (email: [email protected].) CONFIDENTIALITY 3. Do you wish to request a confidentiality order for: 3.1 The fact of the proposed acquisition? No. C:\NrPortbl\iManage\CPB1\515116_1.DOC SOL959\413 3 3.2 Specific information contained in or attached to the notice? Yes, the information deleted on the attached “Public Version” of this notice (Confidential Information). 3.2.1 If so, for how long? Until the applicant and Newvale notify the Commission in writing that particular information is no longer confidential to the participants. 3.2.2 Why? The Confidential Information that has been deleted is commercially sensitive and contains valuable information which is confidential to the participants. The information includes market share information from internal analysis carried out by Solid Energy and, in the event the acquisition does not proceed, disclosure of the information would give an unfair advantage to the participants’ competitors. Disclosure of these commercial assessments would also affect Newvale’s commercial position. In respect of the Confidential Information the applicant and Newvale seek a confidentiality order under section 100 of the Commerce Act 1986, on the grounds that the information is commercially sensitive and valuable information which is confidential to the participants and disclosure of it is likely to give an unfair advantage to competitors of the participants and/or unreasonably prejudice the commercial position of the participants. In respect of the Confidential Information the applicant and Newvale each claim confidentiality under section 9(2)(b)(ii) of the Official Information Act 1982. The applicant and Newvale each request that they be notified of any request made under the Official Information Act for release of the Confidential Information, and that the Commission seek their views as to whether the Confidential Information remains confidential and commercially sensitive, at the time responses to such requests are being considered. DETAILS OF THE PARTICIPANTS 4. Who are the participants (i.e. the parties involved)? 4.1 The participants are: 4.1.1 Solid Energy as the acquirer, and 4.1.2 Marie Elizabeth Highsted and Reginald John Highsted (as trustees of the Reg and Marie Highsted Family Trust), Paul Timothy Highsted, Brett Richard Highsted and Mark Reginald Highsted (as trustees of the Bret Highsted Family Trust, and of the Paul Highsted Family Trust, and of the Mark Highsted Family Trust) as vendors. ACQUIRER 4.2 The contact details for Solid Energy are: Solid Energy New Zealand Limited 2 Show Place Addington PO Box 1303 Christchurch Telephone: (03) 345 6000 C:\NrPortbl\iManage\CPB1\515116_1.DOC SOL959\413 4 Facsimile: (03) 345 6016 Attention: Warren Maslin (email: [email protected]) VENDOR 4.3 The contact details for Newvale Coal Co Limited: P O Box 151 Gore Telephone: (03) 208 9485 Facsimile: (03) 208 9457 Attention: Bret Highsted (email: [email protected]) With all correspondence to: Anderson Lloyd Cauldwell 481 Moray Place Private Bag 1959 Dunedin Telephone: (03) 471 5440 Facsimile: (04) 477 3184 Attention: Paul Hubbard (email: [email protected]) 5. Who is interconnected to or associated with each participant? ACQUIRER 5.1 Solid Energy is a private company and a state-owned enterprise. The shareholders of Solid Energy are: Trevor Colin Mallard 30,450,000 shares - 50% (Minister for State Owned Enterprises) Michael John Cullen 30,450,000 shares - 50% (Minister of Finance) 100% Companies Interconnected or Associated with Solid Energy are: Coalcorp Insurance Services Limited Waikato Mining and Contracting Limited Coal Bed Methane Limited Terrace Coal Mine Limited Coal New Zealand Limited Coal New Zealand International Limited Solid Energy Renewable Fuels Limited Windflow Technology Limited C:\NrPortbl\iManage\CPB1\515116_1.DOC SOL959\413 5 We attach as Appendix B a diagram outlining Solid Energy’s shareholdings in the above companies. 5.2 We attach the following documents as Appendices C and D respectively by way of background information: 5.2.1 Solid Energy’s Interim Report for the six months ending 31 December 2005; and 5.2.2 Solid Energy’s Statement of Corporate Intent 2005. VENDOR 5.3 Newvale is a private company, being wholly-owned by: 5.3.1 Marie Elizabeth Highsted and Reginald John Highsted (as trustees of the Reg and Marie Highsted Family trust) to the extent of 366,862 shares; 5.3.2 Paul Timothy Highsted, Brett Richard Highsted and Mark Reginald Highsted (as trustees of the Bret Highsted Family Trust) to the extent of 183,430 shares; 5.3.3 Paul Timothy Highsted, Brett Richard Highsted and Mark Reginald Highsted (as trustees of the Paul Highsted Family Trust) to the extent of 183,430 shares; and 5.3.4 Paul Timothy Highsted, Brett Richard Highsted and Mark Reginald Highsted (as trustees of the Mark Highsted Family Trust) to the extent of 183,430 shares. 6. Does any participant, or interconnected body corporate thereof, already have a beneficial interest in, or is it beneficially entitled to, any shares or other pecuniary interest in another participant? 6.1 In respect of Solid Energy: No. 6.2 In respect of Newvale: No. 6.3 Additionally none of the directors of Solid Energy hold directorship in any company which is involved in the market in which the business of Newvale operates. 7. What are the business activities of each participant? SOLID ENERGY 7.1 In broad terms, Solid Energy undertakes the following business activities: 7.1.1 Solid Energy is a state-owned enterprise formerly called Coal Corporation of New Zealand Limited. Solid Energy is in the business of mining and processing coal and marketing and distributing that coal for the domestic and export market. The mining operations are based around Huntly in the Waikato, Greymouth, Reefton and Westport on the West Coast and Ohai in Southland. Its C:\NrPortbl\iManage\CPB1\515116_1.DOC SOL959\413 6 operations are backed by service and support centres in Christchurch. Solid Energy produces about 4.5 million tonnes of coal annually. Solid Energy is the coal supplier for New Zealand Steel Limited’s Glenbrook Steel Mill near Auckland and a major supplier to the Huntly Power Station. The major export industries of dairy and meat use Solid Energy coal as an energy source.